Roughly half of real estate investments in recent years made by ultra-high net worth folks went to the top ten “alpha cities,” which includes New York, London, and Hong Kong. According to Savills, between 2006 and 2012, the prices of real estate in the top-ten major cities, from Moscow to Singapore, have risen 11% annually, versus 5% for those outside those major urban areas. But now, after such torrid growth, the prices for prime property markets globally should revert to more regular, demand-driven growth, says Mark Roberts, head of alternatives and real estate for Deutsche Asset & Wealth Management. He estimates those returns will revert to their historic rates of 4% to 6% after inflation.

Here, now, is where it gets interesting. As the prime markets settle down, the research suggests that prices in “second-tier cities” could pick-up pace, as wealthy folks broaden their search for yield.

“The real estate market globally is in the process of broadening,” says Roberts, with ultra-high net worth investors looking farther afield for a safe haven to shield their portfolios from rising interest rates. The research identifies 12 rising but second-tier cities “that are likely to outperform the prime world cities” in the coming years, where cheaper properties make the local markets more “accessible and potentially attractive to yield-seeking real estate investors.”

Savills, Candy & Candy, and Deutsche Asset & Wealth Management

The graphic above compares the price of a 2-bedroom apartment in each city’s most desirable neighborhoods with the average.

The short list of cities, in the graphic above, makes an economic argument for each pick. For instance, the cost of purchasing the average two-bedroom apartment in Chenai, India is $40,000 versus $160,000 for top two-bedrooms in that city. The rationale: As these cities continue to grow, the spread between top properties and the average price, closes, rewarding patient investors.

A few cities will only appeal to the stoutest of hearts and steeliest of nerves. Such as Lagos, Nigeria, where a typical 2-bedroom apartment costs as little as $70,000. The researchers argue that Lagos is a “fast-growing city,” fueled by oil and natural resources, with an increasingly young and urban population. All true, but everything from corruption to the recent horrific kidnapping of school girls by terrorist group Boko Haram makes it hard for us to imagine a lot of genteel investors scarred by the last financial crisis rushing in to Nigerian real estate projects, however attractive the yield.

Deutsche Bank’s Roberts makes a strong case to his clients for five of the locations. In the developed world, he likes Melbourne and Miami. Both are regional financial hubs and levered to the strengthening economies of the U.S. and Australia. Furthermore, each is considered a safe haven in their regions, Miami drawing buyer’s interest from inflation-stricken Latin America, and Melbourne benefiting from rising wealth in Asia. Roberts is targeting returns for property in both cities at around 6%, the “upper-end range” when compared to the prime cities.

Roberts’ top pick, taking into account soft issues like safety and returns, is Dublin. The Irish capital’s real estate market experienced severe price corrections following the 2008 Eurozone crisis; prices fell by more than 50% from their peak, similar to housing crisis declines experienced by the worst hit U.S. cities. But Dublin has not recovered as rapidly, creating a window of opportunity for savvy buyers.

“Property there is still discounted,” Roberts says, “but Dublin’s highly educated workforce, attractive wage costs, and the lower cost of operating a business makes it an attractive place for business and real estate investors.” A number of tech behemoths station their European headquarters there, including Google (GOOG), Microsoft (MSFT) and Facebook (FB). A strengthening business environment and employment picture should boost rents.

Other cities, that are harder to evaluate but still make the grade for Roberts’ clients, include Jakarta and Panama City. Both Indonesia and Panama are among the fastest growing economies in their regions, he says. The report notes, for instance, that Jakarta “has already seen rapid real estate price growth” and that “a growing population and increasing wealth mean that there is probably more to come.”

Meanwhile, Panama City is increasingly drawing the interest of multinational companies due to relatively stable governance and a favorable tax code, with Caterpillar (CAT), Procter & Gamble (PG), and Halliburton (HAL) setting down roots, to name a few of the local multinationals. Furthermore, the widening of the Panama Canal, slated for completion in 2015, should spur additional economic activity, Roberts says. Low residential values means yields of real estate could be in excess of 8%, with the report calling it “a very attractive income play.” Also attractive: The U.S. dollar, along with the balboa, is an official local currency.

In the specter of rising interest rates and with U.S. equities looking increasingly expensive, wealthy folks would do well to broaden their real estate holdings, says Roberts. Choose wisely, of course, but in the underbrush of a few of these under-invested cities, there are some opportunities well worth exploring. If this piques your interest, put pressure on your banker to find professionally managed properties in these areas.

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MAY 14, 2014 9:55 A.M.

Dr. Keith Jurow wrote:

I write the Capital Preservation Real Estate Report and am the most important housing market analyst in the US. Mr. Roberts advice is shocking but not surprising given the euphoria on Wall Street.

Apparently he has totally bought the delusional idea that the housing recovery is solid around the world and there is no need to worry about another housing plunge. I have provided compelling evidence for nearly 4 years that the housing crash is far from over.

Here is one example. I have solid data showing that just in NYC and Long Island, there are over 700,000 seriously delinquent homeowners. Many are still living in their property but have not paid a cent in more than three years. Think that is good for housing markets when the banks finally foreclose?

UHNW investors had better beware of these land mines.

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Richard C. Morais, Penta’s editor, was Forbes magazine’s longest serving foreign correspondent, has won multiple Business Journalist Of The Year Awards, and is the author of two novels: The Hundred-Foot Journey and Buddhaland, Brooklyn. Sonia Talati is Penta’s reporter about town, both online and for the magazine. She previously worked for the Wall Street Journal and various television station affiliates around the country. Sonia has a B.A. in economics from the University of California, Los Angeles, and an M.A. from Columbia University Graduate School of Journalism.